No ‘Armageddon’ for miners: Western Australia Premier

Yolande Chee

Published 4:06 AM ET Mon, 5 Aug 2013
CNBC.com

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West Australian Premier, Colin Barnett

Australia's mining industry has been under increasing pressure over the past year, as slowing growth in China has led to waning demand and a slump in prices of key commodities. But the pressure isn't going to take a heavy toll on resource-rich Western Australia, according to the state's Premier Colin Barnett.

Speaking to CNBC, the Premier shunned the notion that his state's economy is about to face Armageddon on the back of the end of the resources boom.

"This is still a very strong and diversified mining economy. You see huge expansions in iron ore, natural gas… and the re-emergence of copper too as an export from this state," he said.

Barnett said that while he has never bought into boom and bust analogies, there's still plenty of life left in Western Australia's mining industry, and fears of a recession in the sector are overblown.

"While prices have come off…we are not heading into a recession. Recession is when you decline," he said. "The mining industry might not be growing as fast as it was a few years ago, but it is still growing very strongly."

Slowing growth in China is being blamed for a lot of the industry's woes, but with gross domestic product (GDP) slowing to 7 percent, Barnett believes this is still a very enviable position for the world's second largest economy to be in, and he expects Australia's resources companies will continue to reap the rewards.

China is Australia's largest trading partner, with 73 percent of China-bound exports coming from Western Australia. While commodity prices have fallen, Barnett argues that strong growth in China still underpins growth in the mining industry, albeit not as strong as in previous years.

"Over the last 12 months, over A$100 billion ($89 billion) of mining and petroleum products were produced, and even today there is still A$177 billion of mining projects still under construction… So we may have passed a peak period of construction, but the industry is still growing very, very strongly."

However, the transition of the mining boom remains key for Australia. Economists have been focusing on the progression of the investment-led industry to one which is export-led as billions of dollars worth of projects shift from construction to production.

While this shift is currently taking place, Australia's Bureau of Resources and Energy Economics (BREE) notes that there is still around A$268 billion of investment committed to resources and energy projects around the country.